Beat The TSX With This Cash-Gushing Dividend Stock

Income-focused investors can beat the TSX with one outperforming, high-yield dividend stock.

| More on:
happy woman throws cash

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Companies operating retirement homes or long-term-care (LTC) facilities suffered business reversals during the global pandemic in 2020. Fortunately, most Canadian operators recovered gradually, and the situation has normalized. Today, Extendicare (TSX:EXE) is among the profitable prospects for income-focused investors. You gain the best of both worlds: cash flow streams and capital gains.

The healthcare stock is an outperforming, cash-gushing dividend stock. At $10.01 per share, the yield is 5.06%. Furthermore, its 44.76% year-to-date gain handily beats the TSX’s +19.52%. The return is more than double the broad market’s performance. Extendicare is also one of the few companies paying monthly dividends.

Created with Highcharts 11.4.3Extendicare PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Business overview

Markham-based Extendicare operates long-term care facilities. The $847.9 million for-profit LTC provider offers housing, care and related services to seniors. Brands like ParaMed, Extendicare Assist, and SGP Purchasing Partner Network belong to this 50-year-old organization.

Allied services include consulting, contract management, and procurement. Extendicare has 122 LTC homes and renders 10.2 million hours annually for home care services. Under the multi-year Improving Care Plan, management plans to replace older homes and spend $500 million to construct new homes with modern designs. The planned partnerships with hospitals should also improve clinical capabilities.

Its current president and chief executive officer (CEO), Dr. Michael Guerriere, was the chief medical officer and strategy officer at TELUS before joining Extendicare in October 2018. He believes Extendicare is uniquely positioned to capitalize on industry trends and is preparing to expand its market presence and broaden its footprint in Canada to meet the aging population’s demands.

Financial performance

In the nine months ending September 30, 2024 (first three quarters), revenue and net earnings increased 12.6% and 118% year over year to $1.07 billion and $55.3 million. The net cash from operating activities climbed 2,871% to $126.1 million from a year ago. Long-term debt declined 49.6% to $158.7 million from year-end 2023.

The LTC segment contributed the most to revenue (56.1%) and net operating income (51.2%). At the end of the third quarter (Q3) of 2024, the average occupancy rate at LTC homes was 98.4%. Six LTC homes are under construction and construction of two redevelopment projects will commence at year-end.

The volume increase in the home healthcare segment in Q3 2024 was encouraging. “Our strategy continues to deliver robust growth across our operating segments and improved operating results. Sequential growth in home health care volumes was especially notable given the third quarter typically experiences a seasonal pullback in service demand,” Dr. Guerriere said.

Both operating segments have compelling growth opportunities due to a growing demographic. According to management, cash from operating activities, available funds from credit facilities, and future debt financings are sufficient to support ongoing business operations, working capital, maintenance capex and debt repayments. Inflation is an ongoing concern, although the pressure is moderating.

Consistent dividend payer

Extendicare is a reliable passive-income provider owing to its dividend track record and payout consistency. The healthcare stock has paid monthly dividends without fail since January 2013. A $10,010 investment (1,000 shares) will produce $506.51 annual income ($42.21 monthly).  

Should you invest $1,000 in Extendicare right now?

Before you buy stock in Extendicare, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Extendicare wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends TELUS. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »